Earnings Call: Q2 2020

Nov 7, 2019

So as the time has come, let me start the meeting. Thank you very much for attending. Minerva meets business results meaning for second quarter of fiscal year ending March 31, 2020, despite your busy schedule. Let me introduce the presenters of a company. To your right, Repertensive Director, COCOO, Mr. Forsissa Kainuma, Senior Managing Executive Officer Katushika Yoshita. I am serving as your MC. I am from the IR Division. Name is Yajiro. First, today, Mr. Yoshida will explain it by the financial results And next, Mr. Kanuma will talk about the business update and management strategy. After that, we will have an Q and A session. Today, we're planning to end by 7 pm. In terms of the financial related, information, it is in your brief report and the financial supplemental materials. And we have a press release that we have announced today, the dividend surplus, interim surplus dividend. We have distributed that material And we had distributed questionnaires. This will be a very precious feedback to our audio activity. So please answer the questionnaire. And after the meeting, please leave it on your desk. So this meeting, including the QA session, is broadcast live on the internet And to be viewed, afterwards on the website, it is recorded as well. Please understand that. And please refrain from taking photos or taking audio recordings, outside of the related people of our company. Mr. Yoshita, please begin. My name is Yoshida. Today, I would like to explain the consolidated financial results for the second quarter of school year ending March 31, 2020. And then Mr. Kainuma, our President Director, CEO and COO, will explain the highlights, including business updates. So the consolidated net sales for the second quarter of the fiscal year ending March 31, 2023 was impacted strongly by the currency, but the sales was up 18.3% year on year and 36.7 percent quarter on quarter to total 279,433,000,000 yen. As a quarter, the net sales hit a record high. Operating income was down 1.3 percent year on year and was up by 5 point three times in the previous quarter to total of JPY 19,372,000,000. Profit to the period attributable to owners of the parent was down 12.9 percent year on year and up by 6.1 times than the previous quarter to total 13,916,000,000. Currency fluctuations brought net sales down an estimated JPY 6,100,000,000 quarter on quarter, and JPY 7,500,000,000, down year on year. It also brought operating income down 1,800,000,000 quarter on quarter, and JPY 3,000,000,000 year on year. Please go to the next slide. This is a quarterly trend in net sales, operating income, and operating margin. The bar graph on the left is net sales, and the one on the right is operating income. The line chart is for the operating margin. The operating margin for the 2nd quarter was a 6.9%. That was down by 1.4 percentage points year on year, but up 5.1 percentage points quarter on quarter. However, expenses including business integration cost of using totaling approximately 800,000,000 or accounted for as a special factor in the 2nd quarter. The operating margin would have been 7.2% if these were excluded. Also, please note that the figures of the fiscal year ended March 2018 are based on day GAAP and provide a full year reference. So that you can look at past figures. The same applies here and after. Please go to the next slide. This slide shows the difference between the initial forecast as of May and actual results for net sales and operating income by business segment with the 2nd quarter. The Machine Components business segment saw, saw a lower than expected net sales primarily for ball bearings due to the macroeconomic slowdown. Sales for the electronic devices and components business segment were also slower than projected mainly for motors and sensing devices. The midstream businesses sales on the other hand were higher than projected mainly due to increased shipment of mechanical components. The UHIN business saw lower than expected sales due to a significant slowdown in production as a result of the slump in automobile market, especially in China. Operating income for the Machine Components business segment fell short of the forecast as the recovery was slow for the demand for ball bearings using fan motors, and this kept sales volumes down. Operating income for the electronic devices and components business segments are about on target. The Mitsubishi business enjoyed higher than expected operating income as a result of increased sales. The Uxin business on the other hand slowed lower than expected operating income due to a drop in sales. Please go to the next slide. Now, let's take a look at the results by segment starting with Machine Components business segment. On the left is a graph indicating quarterly net sales trends And on the right is a graph with a bar chart. Quarterly operating income trends along with a line chart for operating margins. And sales for the 2nd quarter decreased 2% from the previous quarter to total 45,100,000,000 yen. Bow bearing sales decreased 2 percent quarter on quarter to total 29,200,000,000. External shipment of bull bearings totaled 185,000,000 units per month on average. Despite the slower than expected recovery of demand for ball bearings used in fan motors, demand remained up in the automobile market. Sales abroad ends fasteners totaling 9,600,000,000 yen were down 4% over the previous quarter. Business for the aircraft industry, especially small and medium sized aircrafts, mean steady. Sales of pivot assemblies increased 2 percent quarter on quarter to reach JPY 6,400,000,000, people essentially steadily contributed to our bottom line as we held on to a 80% plus market share. Operating income for the quarter totaled 10,200,000,000 and operating margin was 22.6%. While this represents a 0.6 percentage point decrease in operating margin, operating income declined 5%. Looking at the results by product, we see that operating comparable bearings, road ends, fasteners, and pivot assemblies all fell slightly quarter on quarter. Now let's look at the next slide. This is for the electric devices and components segment. Net sales increased 30% quarter on quarter to reach 101,300,000,000. By product, Salesforce motors were about the same as the last quarter at 45,700,000,000 yen. Electronic devices sales increased by 2.1 times to total 46,400,000,000 yen. This was primarily due to peaking demand for new LED back the products from our major customers. Sales assessing devices were about the same as was, last quarter at 8,200,000,000. The segment recorded an operating income point 7,000,000,000 yen and operating margin of 6.6%. By product, operating income for electronic devices and all the products rose quarter on quarter. Next slide please. Let's look at the performance for the Mitsumi Business segment. Net Sales doubled from the previous quarter to total 1,000,000,000 net sales increased for all products centering around mechanical components and optical devices. Operating income for the quarter totaled 1000000000 and the operating margin was 7.1%. Next slide, please. Finally, let's look at the UHIN Business segment. Net sales decreased 7% from the previous quarter including the pre merger results to total 1,000,000,000. This was due to a significant production decline as a result of a slowdown in the automobile markets, particularly in China, plus Europe and elsewhere. There was approximately 1000000000 one time expenses in 2nd quarter related to special factors such as business integration expenses and ramp up expenses for new products. One time expenses for full year is expected to be approximately 1,000,000,000. Average and income for the quarter totaled 1,000,000,000, putting the operating margin at 1.6%, while this represents a 1.7 percentage point decrease in the operating margin, operating income declined 50%. Next slide, please. The bar graph here shows a trends in profit attributable to owners of the parent while the line graph charts changes in the profit for the period per share. The profit for the period was 1,000,000,000. Earnings per share was 33.5 yen. The next slide please. This shows a quarterly inventory trend. At the end of the second quarter, inventories totaled 180 1,000,000,000 featured 1,000,000,000 more than what it was 3 months ago. Uxin inventory of 1,000,000,000 was included because of the consolidation. Next slide, please. This graph contains a bar chart showing trends in net interest bearing debt, which is total interest bearing debt minus cash and cash equivalents and the line chart indicating free cash flows at the end of the second quarter, net interest bearing debt amounted to JPY 97,900,000,000, which was up 1,000,000,000 from the end of the previous fiscal year. Next slide, please. This is a summary of the forecast for the fiscal year ending March 31, 2020, while we expect the sales to pick up for some products in the second half, global economic trends remain hard to pin down due to currency movements acquired by the decline in automobile shipments and other factors on top of trade frictions that have cast clouds of uncertainty over our markets. As such we have revised our second fiscal half and full year forecast. The exchange rate is assumed to be JPY108 to a dollar to a U. S. Dollar. This slide shows the forecast by business segment, we made revision for each segment as well. This is the end of my presentation. Thank you very much. Mister Kanema, please. So let me give my presentation. So I have a cold. So excuse me, for sounding a bit disagreeable. So today's highlights. As you see here, these are the today's highlights with automotive construction equipment, home appliances, machine tools, the market these markets are not doing well. Smartphones and games has been supportive of our business, and that has been our 1st half rough, landscape. That said, excluding some industries, the trend of recovery of course, for the Semiconductor's business, it's been already reported as recovering, but I'm going to talk about it in details later in terms of all bearings. I think we have already hit the bottom. In terms of auto, automotive related companies, I think most of them has been suffering from, low profits, but using, unfortunately, I think that the business has not been in line with the expectations. This is the thing that we will have to report to you. So there we have 2 plants in China, and So we have a Chinese Automotive Maker as a customer and US Automotive Maker and resupply handles, etcetera. As seen here, there has been a dramatic deceleration of the Chinese automotive market. And the utilization rate has gone down significantly, and that's the current situation. On top of that, the new products has been, you know, ramped up. This is in Europe, and I will touch upon that later in detail. And that would be the next pillar of our business. Put and there's a one off, expenses that we have to account for for this ramp up with a new product. And using, for sure, to grow dramatically, and I am very confident of that. In terms of M and A, we will have been conducting this. And in terms of shareholder returns, as I will explain later, we will execute as shareholders' returns. So for this fiscal year or for, sales increase and the profit declined, like, for this 1st half, So one trillion, if I'm loading this, actualization of this a year ahead of a schedule, we want to achieve this. The smartphone games has been better than expected. And for this fiscal year, I think we'll drive our business. The 1st cycle premium improvement, income, so 100 18,200,000,000. The plan was 12,000,000,000. The difference of this 4,000,000,000 was because of electric components and Mitsumi was the, been able to generate more than effective profit, but the use seems one off expenses, and we see you see that has explained about that. The automotive market has been stagnant and bull bearings. We do have a large share in bull bearings. Excuse me. So if the overall economy slows down, it means that the utilization rate will go down. And the recovery has been slow, slower than we have expected. So in this going into the 2nd half, I think, basically, we'll be in line with our expectations. As I said, for the games, smartphones, is showing strong trends. And I think this is completely different with last year. The last year, we there was produced a lot, but we weren't able to sell what we had produced. But gradually, our products are selling And that's the actual, feedback that we have been getting. So before both bearings of the 5 g, IoT related CapEx is becoming stronger and stronger. So the inventory has been cleared out. And the China air conditioner invert is going using slicing inverters and ball bearings will be sold into these type of air conditioners, air conditioning machines. And this is where we put patients. So if you look at this chart, so this red line year over year comparison. So as you can see, it has gone down substantially, but in the first quarter, it has hit the bottom. And on a single month basis, we have been able to recover to this level. January will be in 200,000,000 pieces. That's what we are hearing. So let's this is completely different from January last year. For instance, if you look at the numbers, August last year for the ball bearing was 200,000,000, September 230,000,000 October 199,000,000 So this year's external sales August, 178,000,000 September 193,000,000. So, October 195, 5,000,000,000. So for October, there's only 4,000,000 difference for August. So it got down it's gone down by 22,000,000. So for ball bearings, for our ball bearings, this is an indicator of the, economy. So it will it lags in terms of the drop and a kind of a harbinger when it goes up. So when I entered this company, that was what I was told. And in reality, if you look at the trend, basically reflects that situation of the economy. So I think basically this is a kind of a a leading indicator of the recovery of the economic situation. You look at our ball bearing shipments, the hard disk drives in 2025, maybe it'll go to 200,000,000 units. But, in terms of the internal sales capacity, but we have we can reallocate that to the external sales. So the margin improvement should be conducted. And with the new plant construction may be delayed a bit under the circumstances. So this is just for your reference. This is a public information. So the other industry's year over year trend. We have taken the semiconductor's OEM, ODMM related numbers. So you can see that, the ball bearings is showing the same trend. And basically all of these lines have hit the bottom. So for the electronic devices and components, the backlights, LED backlights are doing well. The motors business is not doing that well. However, fans is going to recover So going into the second half, we are looking to a recovery in this business segment. For the Mitsumi business, games are doing well. And one thing I want to say is OIS So we have multi camera, front cameras that will be auto focus, large diameter lens, and our adoption use system, So we have a trend that we have started to see emerge. So in terms of optical devices, we said that we're not going to be that proactive to in this business that we have declared as such, but the backlight volume is going to gradually decline, if you assume that it's going to happen, it means that within our software business, optical devices, is one of the areas that we should be focusing on. And one good news is that Mitsume's analog semiconductors has become, a good business. And last month, they'll have a 400,000,000 profit. That's the report that gotten. So in that sense, this will there will be there would be, the last of the eight spheres but maybe they'll be able to increase their ranking among the eight spheres. We're using Today, specifically, this in the showroom and the first floor of the smart lock demonstration is there. So as if you have time, please take a look at this smart locks of using. So this CSD flash handles EXS products these type of products, including home security locks, they will be, like, electrification in this area. So this is the most of the strength, the Minabia Mitsumi. So by being doing this business, the UCIM business, I think it will become a good quality business. So we are being engaged and doing in development and ramping up the production, etcetera. And we are supporting Usen in this manner. But in terms of automotive, you can't, you know, simply change the process that easily. So It's taking a bit of time and it's on about a market, the solution in this market has been directly hitting the UHIN business, but I think now is the time to look for the next opportunity and be unified. Barriers on new products, and Aveda also displayed downstairs I would like you to take a look at them if you have time. Dividend will be JPY 14 1,000,000,000 and JPY 67,000,000,000. Then the 14 yen dividend in the second half as well. So our 20 percent dividend payout ratio And usually, we say it's between 17.5% 22.5%. And this is within that range, and, we would like to make hard efforts in order to achieve by JPY 67,000,000,000. And the share buyback, we have, again, the authorization for 1 year, and it's not that, we have no intention of doing this. However, It is also true that, we are faced with various restrictions which, enable us to do this But when those restrictions go away, we would definitely like to buy back shares as a part of our efforts to improve shareholder's return. So I have given you a brief overview about our strategy. Thank you for listening. Next, we would like to have Q And A session. We would like to accept the questions only from institutional investors and analysts. Before asking a question. Please mention your affiliation name and affiliation. Please wait until a microphone is handed to you. So the second person from the left are in the front row. Takayama from Goldman Sachs. So thank you for this opportunity. The first one is about double bearings production, volume 2nd, 3rd and full second quarter, the new forecast and the SAVA related and automobiles related are recovering and what seems to be the strongest the order of strings, I would like to know. And the machine components, profit margin, 27%. And this is probably the highest, but the sales are not expected to arise sharply, but why is profit margin is likely to go up this much? And that is my question. First of all, the ball bearings, production volume. Q2actualinaverage 244,000,000 units in Q3 and 2 56,000,000 and the Q4 259,000,000. These are the assumptions and by application. Automobile, very strong, as Kainuma explained to you previously, And this year, it has renewed a record high number and a strong trend is likely to stay going forward. And the home appliances and the like, have, recovered from the slump. And, basically, there are no negatives, you know, near, but the only weakness is the fan motors. In June, it hit the bottom. June, July, August, the numbers were a week, but it's recovering. Boosting overall numbers. And the profit margin So this year, we are determined to achieve 1,000,000,000,000 and we have set the sales targets based upon that plan and there are some ups and downs in terms of the numbers It may seem odd slightly, but looking at the ball bearings, as sales are expected to grow going forward. If I may add the ball bearings, Q4 towards Q4, It'll be stronger than the plan. We have received an indication that seems stronger than the plan. And machines for increasing capacity, we will try to suppress the burden in order to improve our profit margin. Taking all those into account, probably, this type of one number is achievable. So the product mix I mean, is it like a product mix is going to improve going forward in the second half, the automobiles? Last month, it, made the record high number. In this kind of situation, Now we are very grateful to achieve that record high number, but, compared with Farm Motor, the mix is much better and a current trend is likely to continue for some time. My second question is Mitsumi Business. So operating profit, a full year forecast has been revised up Is it, in the games or China or the North America? What is the reason behind that? What is driving the growth is the games OIS OIS was reported in newspaper today. Chinese players seem very strong. And American players are slowing down and China Chinese players are emerging. And that trend is even stronger this year, and we are pleased to see it. And, games, I think you are more knowledgeable but, a game of business is very solid. So those are the growth drivers In our view. Lastly, my question is about Yushin. So these 5 pillars that you referred to at next fiscal year, what type of sales level can we expect for these 5 pillars And in terms of the profit improvement measures, so the business environment is chained, so are there some measures that are you are implementing. So what are your current activities? So in terms of the orders we have already received within the 5 pillars, the CST flash hand handles, So from next year, we are going to see expanded sales of these products. In terms of the production know how, we are trying to make this integral to our production and home security locks. I think for next fiscal year, I want to come out with home security locks into the market. In terms of the detailed figures, in May next year, let us announce that. For example, in terms of margin, you seeing from your perspective next fiscal year, how much should this be? So what do you currently think? So 10,000,000,000 is will be the target for you seeing So 8,000,000,000 is the forecast. So maybe we are short of this target, but if you look at the situation, It's, I think, the automotive industry, depending on the OEM, is very different. So, the strong ones are very strong, but the European OEMs and the US and China Chinese local players, they're not doing well. I think that's the current situation. So we have plants all over the world and doing business with all of the players. So the macroeconomic situation or the automotive industry, I think we have to observe what's happening in these, markets, but the CSD handles, etcetera, for these type of products, and to an E Access products, this will be we are focusing on high end cars. So using currently, and basically these are key locks. So they will be steering like these are mechanical products. So they are targeting or providing products to low end cars. To be able to improve their margin, we have to change the product mix, but, oh, this is an excuse, but the automotive mark for the automotive market, you have to go through various procedures. The model changes once in every 4 years. So that's the cycle in automotive market. So it's another thing that you can snap your fingers into the tomorrow, but once we are taken up as a product, we can continue the business. So I think the home security lock, the 5th pillar, I think that's the best part, the, you know, the low hanging fruit. So I think basically, what you're seeing from the business of ball bearings and what you're seeing from Houston is completely different. Yes. Because the usage is system doing business with limited OEMs, but for the whole bearings, I think it's across the board. And in terms of the basically a good reflection of the economic situation for bull, that's bull bearing. So I think in whether even if you're going to see a recovery, the machine tools is horrible. So I think, it's different depending on the industry, but the semiconductors are recovering. So the recovery is different by the industry. And even if there is a recovery, depending on the strength of the manufacturers, we will be influenced somewhat. And I think, as a components manufacturer, that will be our that's unavoidable. Thank you very much. So the person in the front row Morgan Stanley, my name is Sato. Thank you very much. I have three questions. The first one is somewhat related to the previous question. The ball bearing Q2 185,000,000 was the external sales and number. Could you give me the monthly numbers, external and internal sales. Q2, external sales, 183, 179, 194,194, and internal sales from July 64, 66, 63, So the unit is 1,000,000 units. What about the production 253, 235, 245, Thank you very much. Seem that they have recovered pretty well. And what is the outlook or to what extent did it recover in October? External sales, as I said previously, 195,000,000 And internal sales was 65,000,000. So our total is 260 and the production has been increased to 2 54. So earlier, I talked a little bit about the production And with that as the bottom, actual operation is likely to exceed that level. And my second question is from a Q1toq2backlight and Mitumi's a game OIS are increasing. But from Q2 to Q3 or to Q4, how do you think these three businesses will change? Can I give you sales numbers, electronic devices, Q2 sales, 46.374000000000andq3 of 52,000,000,000 and then 46,700,000,000 is the full Q4 number and the second half are 98.9000000000 and Mitsumi, Q2 100 point 9,000,000,000 82,400,000,000 and the Q4 52 point 52,000,000,000? And the games, Q2 was the peak and Q3 is likely to slow down a little bit. But customers are selling very well. So there may be some upside optical devices, OIS, the Q3 is likely to be far better than Q2 and towards Q4, It will go down again a little bit. That is our view. The electronic devices peaked in Q3. Is that because backlights will increase in Q3. Am I right in assuming that? Yes. Backlight sales will continue to be robust Q2 versus Q3. Thank you. And about the Uxin, after the integration, it's been more than a half year since the integration. I think you have battled with various, production reforms. Particularly, a European operation what is the picture and what kinds of changes can we expect towards the next fiscal year? If you can talk about that, the Europe will be the biggest key of factor for Yushin's turnaround in the past 6 months, I visited the europe three times. Once every 2 months, our management visits Europe. And we have organized a huge support team and centering around a new product. So we are implementing improvements. And the vertical integration is going on and the parts and components We are supporting production of the parts and the components for vertical integration. And in addition to that, I joined the sourcing with Minnebela, Mitsumi, purchasing and, integrating logistics is another thing that we are working on. And next, yeah, there will be many new products launched into the market. So by accumulating ability, we shall be able to have smooth launches and that will change the tide and, Yushin's business will start to improve. People are motivated. The employees are more serious than, and the diligent than I thought. So, organizing good teams we would like to solve each and every problem. But, automobile market in Europe there are positives and negatives and, there may not be sufficient sales, so we need to keep paying due attention to that. So let's go to the next question. Please raise your hand if you have a question. So on the left, 2nd row from the front, so I could take you from number of securities So there are 2 brief questions I want to ask. So the previous question said that the device for the third quarter 4th quarter the sales will just go down modestly. I think that is your assumption. So normally, the 4th quarter basically the quarter is it's a quarter that the sales drops a lot. So why are you assuming a moderate decline of sales That's my first question. So it's very difficult to say, but there are new products, introduction cycle that's different from previous years. So normally, towards the second quarter to quarter, we will produce. And then the fourth quarter, we will see a decline of sales this product has a different cycle than the normal cycle. So that means the fourth quarter will see some level of sales coming up because of this new product. Understood. Again, for the electronic devices and components, the Mitsumi business And there are some use units that went into electric devices. So for the full year, how much, will this sales generate Well, it's about 15,000,000,000 is related to this specific business unit, 10,000,000,000 is working from it to me. The new business is about, 1 point 15,000,000,000. Again, confirmation about figures So in terms of the corporate expenses, with the full year expectations, 3,000,000,000 has increased by JPY 3,000,000,000 from the beginning of the fiscal year. So can you go into the given the breakdown So the next year onwards, well, maybe it's 3,500,000,000 by quarter. I think what's this run rate in the past is, are you going to be going back this run rate for next fiscal year onwards, would you like, please give me that number? The 1st quarter, in the 1st quarter, Well, when we give a presentation, I think I referred to that for this fiscal year, we extended the retirement age to sixty five years old. With this, the retirement, we have increased some, provisions for the retirement benefits shortfall because of this. And M and a has been we have been very active in on M and A front. So expenses and costs related to M and A has been coming up. So that is the major reasons. And for the M and A cost, if this has not gone up at about 1,000,000,000, I think basically would be the corporate cost. Understood. Thank you very much. So, any other questions? So the 2nd row and the 2nd person from the left. Thank you. Watanabe from SMBC Nikko Securities. Two questions. One is about OIS. So you said that you'll be more proactive in OIS, but in terms of investment, what is your stance? So Saboo capacity expansion, or are you going to expand the scale of the plant, or are you going to utilize Cambodia plant So is it well, is this focus going to entail any CapEx? So basically, we are not thinking about expanding our capacity as stable. So if the volume goes up, this will be absorbed in Cambodia. In terms of CapEx, we are conducting CapEx, but it's we are not in the phase that we need huge CapEx. So there are there will be, numerous business opportunities, but if that comes up, we will, reallocate existing capacity or rearrange the existing capacity. So we will not invest hugely in CapEx, and I think basically we'll be able to cope with that level. So the Chinese OIS will be concentrated in Cambodia and the Philippines will be basically will be focusing on the biggest customer. So we will rearrange, this capacity so that we can enhance our overall capacity. I think that's the way to look at it. So this still will be your sub core business. Understood. Thank you very much. And my second question is about Well, I want to ask about UCIM. So UCIM, originally, they have been doing their business. And after the acquisitions, I think the business has changed. But I think the was Europe the major reason of the acceleration But, where we're using has been, conversely generating profit. It was not impacted. It's both, actually. So the UAM That's the European business. Well, and the the the former UC Group, excluding Europe, that has been profitable. And the Europe group, that's basically speaking there, 2 businesses, both has been impacted by the automotive market slowdown. And their profitability is declining for both parts of their business. I cannot go into detail, but I think more or less you have, have assumptions about the customers. And if you look at those customers, So, so doors have poor handles. And with the co related to that decline of the sales of the car with cars, the handle sales will go down as well. So you can't change the 4M but it's difficult to assume that the automobile business is going to come back strongly in the next fiscal year. But besides new products, Are there any other measures that you can come out with? So my policy is that So home security locks. So new product should be produced at various sites and then sold in various markets. But, I think being on the offensive with the best defense. That's my policy. But in terms of automotive market, there's a very clear demarcation between what we can do that we can do. So we can't just stand by the sidelines and expect something to happen and what we can't control. So in terms of what we matches our characteristic is the home security lock. I think this is a good match with our business policy, so I'm trying to focus on that. Thank you. Thank you very much. Any other questions? Then the second person from the left far left line Mitsubishi of Shea Morgan Stanley, which is my name. You very much. I have two questions. 1, the first one is about backlight. You talked about the seasonality earlier, and there will not be a huge decline from Q3 to Q4. As for the future direction, the seasonality could be mitigated the, next year onwards. Is it right? And, backlight demand forecast, for the next fiscal year. As Yoshida explained earlier, well, it rather hard to say, but the sales, we have this planned sales and that is the reason why it's a sort of mild, carb and a Smartphones, it probably a lies to the overall situation. That is my answer to your first question. And about the next fiscal year, as I usually say, backlight, I have never heard from our customers that the backlights will diminish or cease to exist. That is what I can say when it is to disappear And then I will say so, but today, there is no indication that it is are going to disappear. And that is as much as what I can say at this point in time, I hope it's alright. It is alright. And my second question is, Mitsumi's, machined components, particularly for game consoles, the demand in the first or the production was quite a solid probably it was impacted by a trade and the second half, is there any risk for slowing down? So, now with regards to this business, there is no signs of slowing down. Rather, it will be very strong. I cannot give you more details But if you speak to our customers or the companies that you think are our customers. I think you can understand the situation. So on the very front row, please. Thank you for your presentation. Goto from Mizuho Securities. I have one question. So mid to mid midterm direction. So basically trying to flush up the current business. The actuators. I think you have mentioned that in games. I think basically said it was a robust, but I think some change will come into future. So as an ex driver, what are the businesses are trying to develop? So what are the conditions or what is the progress about the next driver for Mitsumi? So in the conventional segmentation, is Mitesumil is game OIS and others, well, others are not that good. I think that's what you think, but Semiconductors that's one is what area that we want to put a lot of focus on because well, when we acquired Mitsumi, I thought that, with the same connector, since the first that we're going to sell, but conversely, Semiconductors is showing a very good trend, and they are basically the core of generating profit So we want to develop the semiconductor business. But if you look at the conventional segmentations, maybe this will lead to misunderstanding because in the 1st floor, we have IoT displays or exhibitions, and I think you'll understand the home security blocks, etcetera. So all of these businesses backed up, I mean, to me, it's not Minne Biena. It's Mitsumi's staff or business is backing up these new businesses So so using cannot do these type of businesses alone. So this, I think basically we have to change the segmentations, in the future, So rather than looking at this convergence segmentations, so the synergy that we are focusing on, this is what this combined strength is what we are putting priority on. So if these things come out in the market and we have to show that these things will sell. And, we do understand that we have to prove ourselves. So we will strive to bring, to show you that evidence as early as possible, various measures initiatives are in place, actually, but maybe and not enough to make you believe the next fiscal year, I hope that we'll be able to show you the evidence of our, efforts. Thank you. So any other questions, please raise your hand. Questions. If you have questions, please raise your hand. Then, again, please. So this is my second time to ask. For the ball bearings business, there are two questions I have One is that for the fan motors, the recovery of the fan motors man. So the last year was the level was low. So year over year, it's better. But, is it going to recover to the past peak, or is it just your clear clearing those little hurdles? I want to know about that. Other is for the automotive business, so fuel efficiency, etcetera. And, I think basically it's better than the automobile output, but the automobile output itself is going down. But is this, a source of factors are there or actually, basically, recovering despite the fact that the ultimate output is declining. Could you elaborate on that? So to fan motors recovery, So we have 5g IoT, as you all know, will certainly become the driver So this FM motors, as long as the inventory is cleared out, the demand will come back. But how far will this recovery be I think it depends on how the market, behaves. So what we can say at this point is that the, the if you hit the bottom and seen a sharp recovery, that's the length that we can say. So in terms of how this chart, the recovery is going to look like maybe next year 2 years after maybe in retrospect, we may be able to say that, oh, this was a reset recovery That is what we are assuming based on past experiences. So I think, basically, we are assuming and reading in a lot. For the automotive industry, the electrification is going to go forward. This was a thing that will all happen So meaning that the motors or the popper's motors and popperware's that we use in motors, so I have to from I have to prove that it will work, from 2 30 degrees to more than 20 degrees, there's limited companies. Well, Chinese companies cannot supply these type of brands that has this level of heat resistance. So I think that means we have an advantage. So this trend, so as, is EV, then this this trend will accelerate. So we have this kind of negatives and positives into some, automotive market, but even So the ball bearings usage of our ball bearings in the automotive, is increasing. And I think this is remarkable So a lot of different type of automobiles is going to be EV or becoming hybrid vehicles, means that, for instance, the air resistance controlled breaks, etcetera, will use pole bearings So we will, establish a business, and then that will change your margin outlook. So we want to be engaged in this business. 2nd row from the right hand side and Paul's line, Hirata, UBS Securities. So thank you for your explanation. I have questions about the backlight. So from Q2 to Q3 sales are likely to increase and from Q3 to Q4 growth, I will be a modest, you said. And the Mizumisa games, seems to be an upside. And Q2, Q3 and Q4, do you feel there is an upside, and did you put together a conservative numbers? What is your feeding And you also said that the backlights will not disappear next year. Is it going up or remains the same? So qualitative information I would like to get, if possible. This industry, as you know, It's very difficult to predict, but, taking into account the various pieces of information we think that things will be quite solid going forward. And the various changes the customers and, and, customers related the information suggests So I think there is a possibility for an upside and that is about Q2, Q3 and Q4. But next year onwards, as Kainuma said earlier, I mean, what Kainuma said is smart information as we can give at this point in time. So if there are any backlight business opportunities, we will capture them. My second question is. So earlier, you said that you will keep looking for M and A opportunities and, Mr. Kainuma, what is the thing you want the most right now? You have both various businesses and what is lacking in your view, areas or technologies to be quite, frank. There are 2 things. 1 is this, U. S.-China trade friction the performance of the companies have deteriorated. And therefore, we stop or suspended the business, but in terms of the area, it's rather difficult to say But later on, I think, you will be convinced or that is a type of the area are aiming at where we can exert our comprehensive capabilities and using And I think you will see if you look at downstairs, Aminibail, Mitsubishi products, the machines, the products that we are working on shall be quite a percasive as I mean, a bit of Mitsumi products and backlight, we had the dependency on backlights. And this year, we were helped by backlights, but probably this year will be the last year of such. Kinds and 8 spares without a dependent on a backlight. And comprehensive products, we would like to launch into the market So that is the same strategy we have been working on in the past several years. Any other questions? If not, we would like to end the meeting.